| SooperKanoon Citation | sooperkanoon.com/70586 |
| Court | Income Tax Appellate Tribunal ITAT Mumbai |
| Decided On | Jul-14-1999 |
| Reported in | (2000)74ITD34(Mum.) |
| Appellant | Jost'S Engg. Co. Ltd. |
| Respondent | Deputy Commissioner Of Income Tax |
2. The common ground taken in all these appeals is that the CIT(A) erred in confirming the levy of penalty under s. 271B by the AO for each of the three years involved.
3. The turnover of the assessee-company was about Rs. 10 crores each for the asst. yrs. 1986-87 and 1987-88 and about Rs. 13.5 crores for the asst. yr. 1988-89. As its turnover exceeded the limits stipulated under s. 44AB, it had to file the audit report as required under this section within the specified dates for each of the three assessment years involved. It, however, did not file the audit reports in the prescribed form within the specified dates. The relevant details for the three assessment years involved are as follows :----------------------------------------------------------------------Year ending 31-3-1986 31-3-1987 31-3-1988Assessment years 1986-87 1987-88 1988-89Date of statutory audits 6-8-1986 24-8-1987 4-8-1988Due date of filing of 31-7-1986 31-7-1987 31-7-1988return of incomereturn of income 31-8-1986 30-9-1987 31-10-1988Date of filing of returnof income 30-9-1986 30-9-1987 31-10-1988Date of tax audit report 18-1-1989 18-1-1989 18-1-1989Date of order u/s 143(3) 30-1-1989 7-3-1989 31-8-1989---------------------------------------------------------------------- 4. It may be observed that for the asst. yrs. 1987-88 and 1988-89, the returns were filed within the time extended by the AO for filing the return of income. For the asst. yr. 1986-87, there was only a slight delay in the filing of the return after the extended date. There is, however, considerable delay in obtaining the tax audit report for each of the three years, as all the reports were obtained only on 18th January, 1989. However, the reports were filed before the AO for each of the three years before the relevant assessment under s. 143(3) was made. In view of the considerable delays in the filing of the tax audit reports, the Revenue authorities levied the impugned penalties of Rs. 1 lakh for each of the three years involved, under the provisions of s.
271B. They had rejected the legal grounds taken by the assessee as well as the factual reasons made out as the explanation for the delay. The factual explanation given for the delay before the AO read as follows : "Our clients have various branches and have projects at various sites offices. In view of several accounts people involved in compiling tax audit details at each of the locations, there was a problem with regard to consistency in preparation of the particulars and at several locations, the details had to be compiled all over again. In the meantime, the staff at the head office which was involved in the job left the services of the company and new people had to work all over again and compile the required particulars." 5. The Revenue authorities observed that the above explanation does not hold water inasmuch as the above circumstances, if true, must have also resulted in a delay in the completion of the statutory audit as required under the Companies Act, but there was no such delay in the completion of the statutory audit for any of the three years and the statutory audit for all the three years had been completed before the due date for filing of the return.
6. Before us, the learned counsel for the assessee relied upon the decision of the Tribunal in the case of Dy. CIT vs. Rediffusion Advertising Ltd. (1998) 65 ITD 29 (Bom) and pleaded that where an assessee who is required to get his accounts audited under any other law in terms of the proviso to s. 44AB as it stood during the relevant time gets his accounts audited and obtains the audit report before the specified date then he can be considered to have complied with the requirements of s. 44AB, though the tax audit report in the prescribed form as required under s. 44AB is obtained only after the specified date. The relevant portion of the headnote of this decision reads as follows : "On an in-depth analysis of the language and the words used while prescribing three different requirements to be specified in second proviso to s. 44AB, it is evident that requirement of getting the accounts audited and to obtain the report of audit under other law are to be fulfilled before the specified date-as prescribed in the main section, but as far as the third requirement, i.e., requirement of obtaining the further report in the form prescribed under s.
44AB-in Form 3CA, 3CD, is concerned, there is no mention of the date or period by which such further report is to be obtained. The use of the words, 'before the specified date' for first requirement, use of words 'before that date' for second requirement and omission of these words for third requirement leads to one and the only conclusion that the legislature has consciously avoided the limitation for obtaining the report of audit in the form prescribed under s. 44AB. Therefore, in case of those assessees who are covered by second proviso to s. 44AB, there is no time-limit for obtaining the tax audit report.
Moreover, the words 'in the form prescribed under this section' used in the second proviso only require the assessee to obtain the audit report in the prescribed forms and not 'as required by s. 44AB'.
This difference clearly confirms that the legislature had required the assessee only to obtain the tax audit report in Form Nos. 3CA and 3CD, which are prescribed under r. 6G of the IT Rules, 1962 and not to obtain the report 'before the specified date'. Therefore, if a person who is required to get his accounts audited under any other law, has got the accounts audited and has obtained the report of audit required under that other law before the specified date and further has obtained a report of audit in Form Nos. 3CA and 3CD 'as prescribed under r. 6G, r/w s. 44AB' then, he is considered to have complied with the requirement of s. 44AB meaning thereby that by virtue of second proviso, there is time-limit for getting the accounts audited under other law and to obtain the report of audit under that law but there is no time-limit for obtaining the report of audit in Form Nos. 3CA and 3CD." 7. In the light of the above decision it is claimed that the assessee cannot be visited with penalty under s. 271B for any of the three years in question in spite of the fact that the tax audit report had been obtained only after a substantial delay after the specified date. It is also pleaded that the abovementioned proviso has also been subsequently amended by the Finance Act, 1995, w.e.f. 1st July, 1995, and the proviso as it stands today requires the furnishing of the audit report before the specified date which, it did not do as it stood during the period relevant for the three assessment years in question before us.
8. We are constrained to reject these contentions of the learned counsel for the assessee. Sec. 44AB as it stood during the relevant period read as follows : "44AB. Audit of accounts of certain persons carrying on business or profession. - Every person, - (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year; or (b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year, get his accounts of such previous year or years audited by an accountant before the specified date and obtain before that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed : Provided that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and obtains before the date the report of the audit as required under such other law and a further report in the form prescribed under this section." "6G. (1) The report of audit of the accounts of a person required to be furnished under s. 44AB shall, (a) in the case of a person who carries on business and who is required by or under any other law to get his accounts audited, be in Form No. 3CA; (b) in the case of a person who carries on business, but not being a person referred to in cl. (a), be in Form No. 3CB; (c) in the case of a person who carries on profession, be in Form No. 3CC. (2) The particulars which are required to be furnished under s. 44AB shall, - (a) in the case of a person carrying on business, be in Form No. 3CD; (b) in the case of a person carrying on profession, be in Form No. 3CE." "Form No. 3CA [See rule6G(1)(a)] Audit report under s. 44AB of the IT Act, 1961, in a case where the accounts of the business of a person have been audited under any other law. I/We have to report that the statutory audit of ................. (name and address of the assessee) (Permanent Account No. ......) was conducted by me/us/M/s. ............ in pursuance of the provisions of the ........... Act, and I/we annex hereto a copy ofmy/our audit report dated ....... along with a copy each of the audited P&L a/cfor the year ended on ........ and a copy of the audited balance sheet as at .......... along with the documents declared by the relevant Act to be part of, orannexed to, the profit and loss account and balance sheet. A further report as required under the proviso to s. 44AB is furnished in FormNo. 3CD annexed hereto. In my/our opinion and to the best of my/our information and according to explanations given to me/us, the particulars given in Form No. 3CD, are true and correct.
11. It may be seen that the proviso to s. 44AB which applies to a person who is required to get his accounts audited under any other law as in the case of a company like the present assessee before us not only stipulates that (a) the accounts should be got audited before the specified date, but (b) the report of the audit should be obtained before the specified date and (c) a further report in the form prescribed under s. 44AB, i.e., the tax audit report, should also be obtained before the specified date. Any reading contrary to this version would, to our mind, violate the syntax of the proviso. In other words, the proviso should be read as follows : "Provided that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance, with the provisions of this section if such person gets the account of such business or profession audited under such law before the specified date and obtains before that date the report of the audit as required under such other law and obtains before that date a further report in the form prescribed under this section." 12. The learned counsel for the assessee urges that the words "before that date" which we have inserted should be excluded and that there is no authority for that insertion, as we have done. This, to our mind, is totally untenable as the proviso used the word "report" twice and the expression figuring before the earlier "report", i.e., "obtains before that date", should in its entirety precede "a further report" as a matter of simple grammatical usage. It may be observed that under the provisions of s. 44AB what has to be obtained is the audit report in the prescribed form setting forth "such particulars as may be prescribed" and these particulars are prescribed in Form No. 3CD in terms of Rule 6G, which we have quoted hereinabove. Form No. 3CD is applicable to a person carrying on business, where such a person is required to get his accounts audited under any other law mentioned in cl. (a) of r. 6G or a person who is not so required as mentioned in cl.
(b) of r. 6G. It is this form, i.e., Form No. 3CD, which is important for the purposes of s. 44AB, as it is only this form which furnishes the prescribed particulars required under s. 44AB. As per the argument of the learned counsel for the assessee, it is only the Form No. 3CA which has to be obtained within the specified date and not Form No.3CD. This contention is not acceptable as it violates the syntax of the proviso to s. 44AB as we have indicated hereinabove. If there are any further doubts in the matter, they are dispelled by reference to the provisions of Form No. 3CA which we have extracted hereinabove, as this form clearly stipulates that Form No. 3CD should be annexed to Form No.3CA. As there is no dispute that Form No. 3CA has to be obtained before the specified date and as Form No. 3CD has to be annexed to Form No.3CA, it logically follows that even Form No. 3CD should be obtained before the specified date, as otherwise the annexation visualised in Form No. 3CA would not be possible. This aspect of the matter totally escaped the attention of the learned Bench of the Tribunal which gave the above cited decision in the case of Dy. CIT Rediffusion Advertising Ltd. (supra). Normally, we would feel bound by the decision of an earlier Bench, as a matter of judicial discipline. However, where a clear statutory provision has escaped the notice of the Tribunal, we have, with respect to that Bench, to differ from the decision of that Bench. In this view of the matter, we have to differ from the above cited decision of the Tribunal and hold that the assessee in the present case cannot get any automatic legal protection from the language of the proviso to s. 44AB and as such we reject the contention advanced by the learned counsel for the assessee in this regard. We have to see whether there was any sufficient reason for the assessee to explain the delay in the filing of the tax audit report in Form Nos.
3CA and 3CD. We find that the assessee is not a new assessee and it is also not a marginal case where the turnover just exceeded the limits prescribed under s. 44AB. Even the asst. yr. 1986-87 is not the first year when the provisions of s. 44AB became applicable. We also find that there is considerable delay of a number of years in the filing of the tax audit report. They were filed only on 18th January, 1989, whereas even the extended date for filing of the return had expired much earlier, as is evidenced from the table given by us hereinabove.
We, however, find that for the asst. yr. 1988-89, the delay in the filing of the tax audit report is only marginal, whereas for the other two years, i.e., 1986-87 and 1987-88, there has been considerable delay. The learned counsel for the assessee argued before us that the tax audit report requires types of details different from those contained in the statutory audit report and so the absence of some staff during the relevant time would explain the delay in the obtaining of the tax audit report. We are of the view that the explanation offered may explain the delay in the obtaining of the tax audit report for the asst. yr. 1988-89. It does not so explain for the asst. yrs.
1986-87 and 1987-88. In the course of the hearing, we queried about the correspondence between the assessee and the auditor concerned about the completion of the tax audit report, but it is not available. No correspondence between the head office and the branches on the issue of the completion of the tax audit report and the details required has been filed before us. In these circumstances we are of the view that there was no sufficient reason for the delay, which is considerable in the obtaining of the tax audit report for the asst. yrs. 1986-87 and 1987-88. We accordingly delete the penalty levied for the asst. yr.
1988-89 and uphold the penalties levied for the asst. yrs. 1986-87 and 1987-88. We may also observe that the AO has levied only minimum penalties as mentioned in s. 271B. We may also mention that we do not find that the subsequent amendment of s. 44AB by the Finance Act, 1995, w.e.f. 1st July, 1995 requiring that the tax audit report should be furnished before the specified date has any impact either way on the issue before us. Even before the said amendment, as per the terms of the proviso to s. 44AB, the statutory audit report and the tax audit report had to be obtained before the specified date. In the present case, we are concerned only with the factum of obtaining the tax audit reports for all the three years and not with the date of furnishing such reports to the Department.
13. For the above reasons, we uphold the penalties levied under s. 271B by the AO for the asst. yrs. 1986-87 and 1987-88 and delete the penalty levied for the asst. yr. 1988-89.
14. The appeals for the asst. yrs. 1986-87 and 1987-88 are thus dismissed and the appeal for the asst. yr. 1988-89 is allowed.